Interview with Floris Lyppens: Long-term investment in sustainable society and a good life

Offshore wind farms will become an important source of stable and sustainable energy for prosperous and densely populated parts of the world. Floris Lyppens is Head of Structured Debt at ABN AMRO, and one of his projects is to work together with a team of specialists to finance maritime wind power projects. Below, he explains how this new market works.

"Creating and benefiting from offshore wind farms"

Floris Lyppens, head Structured Debt

Why is ABN AMRO focusing on offshore wind farms?

It is commonly known that the Netherlands are lagging behind the environmental targets set by the EU. The Dutch government has been rebuked for its underperformance by many parties, including Brussels. The consequences? During the next few decades, the country is going to make great efforts to catch up on renewable energy generation. An Energy Agreement has been signed, confirming that offshore wind farming will play a major role in the catch-up. Right now, 5% of Dutch energy is renewable, and the aim is to increase that percentage to 14% by 2020, and 16% by 2023. ABN AMRO sees this ambition as a unique opportunity to apply its many years of experience in the maritime industry and the energy sector to this promising field. Through project financing we will help the government realise those offshore wind farms, so the Netherlands do meet their environmental targets in future - and preferably outperform them. The government investment will add up to about 11 billion euros over the next 8 to 10 years. Note that the proposed offshore wind farms together will be a larger project than the country’s famous Delta Works! It is quite a job, and will involve many Dutch construction companies, soil investigators, and suppliers of wind turbine foundations.

We all know that offshore wind farms are expensive, and as a result, economically vulnerable. Why get involved?

If we were to allow ourselves to be guided by the mercantile spirit of our Dutch ancestors, and only focus on the price and the short term, starting tomorrow we would be building dozens of coal-fired power stations. You can get coal for peanuts. But coal is terribly bad for the environment, and that excludes this fuel from our future. If you want to build a sustainable economy and also keep the people's support, you must find an energy source that checks all the boxes: environmentally clean, economically scalable and socially responsible. As in Germany, Denmark, and the UK, the amount of available land is limited here, because the Netherlands is densely populated with an average of 488 persons per square kilometre. When you think it through, offshore wind farms are obviously part of the solution.

So a sustainable and wise solution in the Netherlands is not necessarily good for the US as well?

Exactly. Truly sustainable solutions take local factors into account. The US has an abundance of land. It would not make sense for the Americans to build offshore wind farms. In relatively crowded North-West Europe, however, they are essential for clean and stable energy in the long term. And looking at other densely populated areas in the world, we see ample untapped opportunities. But there is another aspect we have not yet addressed.

Which aspect?

There is a growing realisation that the world is in a state of flux. Energy policies are to some extent a geopolitical matter. The more you can control your own energy supply and work within your own borders, the more powerful and independent your position in the political arena becomes. In other words: you could see offshore wind farms as a long-term investment in our own political weight – in this case, the weight of the Netherlands and Europe. Currently for the Netherlands, six offshore wind farms are on the drawing table with a total capacity of 3500 MW, which will provide for about 5 million households. Our objective is to cut the cost of wind energy by 40% between now and the completion of the last wind farm.

Let us assume that the Netherlands and Europe will indeed benefit from offshore wind farms. What is ABN AMRO's role in realising them?

We mostly come into play during the most difficult phase: construction. We have both technical knowledge of offshore projects and financial knowledge regarding the risks, based on decades of experience in financing the oil and gas industry. So we know how to best approach this business case. Once the offshore wind farms are in place and the revenue stream starts flowing, the risks will decrease and new parties will want to get involved. As such, our role is a facilitating one.

So, concretely, what knowledge will ABN AMRO contribute?

Knowledge on foundations, turbines, ship building, cables, maintenance, weather influences, and more. This knowledge is vital in setting up the complex financing of these projects.

How do you limit the costs of offshore wind farms and boost the returns?

We host frequent seminars and share our knowledge with experts around the globe. One of the new insights is that standardisation is a particularly effective way to save on offshore wind farms. Standardisation is going to be a big topic.

It may be obvious, but why does this project financing fit in with the sustainable banking ideal?

It actually fits in in two ways. First, like our clients in this industry, we provide a concrete contribution towards making the Netherlands more environmentally clean and economically stable. Additionally, every bit of knowledge and experience related to these projects has long-term value, because we can use it in similar projects elsewhere in the world. North-West Europe is not the only densely populated place on earth where people are interested in clean air and a good life.